Leading financial researchers report that 75 percent of U.S. businesses do not sell. It dismays me to see entrepreneurs receiving so little in return for all their years of hard work. Or, having to shut their doors with no buyers in sight.
It’s even more disappointing, since businesses can easily take steps to achieve maximum perceived value for a potential buyer. It just takes a little planning, know-how and application to take a $100,000 a year profit generating business and sell it for either $200,000 or for over a million bucks?
Do the math! Multiply your profits by two and by ten.
That’s the range that you can sell your business for when you follow advice I give to MaximizeYourExit.com clients including these seven steps to maximum profit.
My Top 7 Ways to Maximize Your Exit Strategy Now & Sell Your Business For Maximum Profit
When it’s time to sell, you must ask an all-important question: “What am I doing to increase the asset value of my business?” To prepare for your sale, start with these pointers:
1. Quantify Your Business Value
No one will price your business without knowing its exact worth. You need to identify which assets to include or exclude from the sale. You also have to list your risks. Then you’ll have a better idea of the value of your business. It may not be worth as much as you’d like, but now you have a realistic idea about price expectations and goals to meet.
2. Eliminate Worthless Inventory and Debtors
No one wants a business with out-of-date stock. So, get rid of it. Same with long-term non-payers. Make them an offer they can’t refuse or write them off. Both outdated inventory and debtors weigh down a sale.
3. Straighten Financial Records
Buyers want the facts, and they will be asking scores of financial questions. You must be prepared to answer everything and anything about the reporting end of your business. This includes balance sheets, assets and liabilities and the taxation position. All clean and ready to view.
4. Audit Your Books
More specifically, your CPA needs to audit your business records to include extensive verification, confirmation, and performance. An evaluation of internal controls can be considerable help to both you and the buyers.
5. Strengthen Legal and Contractual Affairs
Buyers will also have many legal questions. What is the ownership and structure of your business? Have you been compliant with the regulations for your particular business? What contracts do you have with customers and vendors? What is their status? What is outstanding?
6. Install and Improve Systems
Owners are the main source for daily operations. Unfortunately, such details are often only stored in their brains. A big plus is writing up department manuals. These how-to’s do not have to be long and complicated. You need just enough to cover the basics and relieve your potential buyers’ anxieties about your absence. You can also use videos using software like Camtasia.
7. Prepare Your Management Team
Even better than the written manuals is having someone in place who can personally answer questions. In larger firms, the buyer wants to know what manager(s) will help with the transition. Who will be the knowledge bank? How long will this source(s) be staying?
This is one of the most critical times in your life. It’s essential to be prepared and ready for any prospect who may come through your door.
The seven steps described above is just the beginning. It’s a start in the right path toward higher profits. If you want to sell your business for maximum profit, then you need to start planning your exit strategy now.
by Harvey Zemmel